JAKARTA (RambuEnergy.com) – Rio Tinto, a world’s giant gold and copper miner, has set the price for its 40% interest in Freeport Indonesia at US$3.5 billion. The company is currently in talks with PT Indonesia Asahan Aluminium, an Indonesian state-owned miner, for the sale of the stakes.
“Rio Tino confirms that discussions between Rio Tinto, Inalum and Freeport are ongoing, including as to price. No agreement has been reached,” Rio Tinto said in a statement.
The Indonesian government now expects the deal would be reached by June this year, delayed from earlier plan of April. However, Rio Tinto could not guarantee that an agreement would be reached.
“…There is no certainty that binding agreement will be signed,” the company said in a statement.
Inalum President Director Budi Gunadi Sadikin said in Bali recently that the company has the financial back-up to purchase the Rio Tinto’s stake in Freeport. However, he said, both parties have yet to reach a deal on the price of the stakes.
He said Inalum has adequate cash on hand to finance its existing projects. The company has also obtained support from national and international banks to finance the purchase the Freeport stakes.
Based on the prevailing regulation, Freeport is required to divest up to 51% of the Freeport Indonesia shares to the Indonesian government. So far, the government already holds 9.36% shares in Freeport Indonesia.
However, Freeport’s joint venture deal with Rio Tinto earlier over production and financing has complicated the talks between the two sides.
Rio Tinto has a joint venture with FCX for a 40% share of production above specific levels until 2021, and 40% of all production after 2021.
Grasberg, located in the province of Papua in Indonesia, is one of the world’s largest copper and gold mines in terms of ore reserves and production.
The Grasberg underground block cave project was initially expected to come online in 2017 when the current open pit mine is expected to be depleted. This will transition the mine from primarily an open pit to a fully-underground operation. It was initially expected to ramp up to full capacity by 2022, reaching 160,000 tonnes per day of ore.
Block caving is a highly resource-efficient method of underground mining, in which large underground ore blocks are cut from beneath, allowing the ore to collapse under its own weight.
In addition, Grasberg has begun construction on the Deep Mill Level Zone block cave mine, which will produce an additional 80,000 tonnes of ore per day at full capacity, expected in 2021. Together, these two projects will supply ore to the mill at 240,000 tonnes per day by 2022.
At end of August this year, both parties have reached an understanding on a framework to support PT-FI’s long-term investment plans in Papua. This framework, which will require definitive documentation and FCX Board and partner approvals, includes the following key terms:
• PT-FI will convert its Contract of Work to a special license (IUPK) which will provide PT-FI with longterm operating rights through 2041.
• The Government will provide certainty of fiscal and legal terms during the term of the IUPK.
• PT-FI will commit to construct a new smelter in Indonesia within five years.
• FCX will agree to divest its ownership in PT-FI at fair market value so that Indonesia interests own 51% of PT-FI’s shares. The timing and process of divestment is being discussed with the Government. The divestment will be structured so that FCX will retain control over operations and governance of PT-FI. (*)